[phpBB Debug] PHP Notice: in file /viewtopic.php on line 1002: date(): It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected the timezone 'UTC' for now, but please set date.timezone to select your timezone.[phpBB Debug] PHP Notice: in file /viewtopic.php on line 1002: getdate(): It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected the timezone 'UTC' for now, but please set date.timezone to select your timezone.Misconduct and malpractice. Investment industry "best and worst practices". Information to improve public protection. Expert witness services for industry and investors. Forensic investment analysis. • View topic - Solutions, Self Defense and Best Practices

(Now just for fun and curiosity, note how the SEC spells “adviser”, and note how your “advisor” spells it….put that info away in the back of your mind for now)

Secret tip #2. Spend just 20 minutes on Google or another search engine, looking this up: difference between a broker with a “suitability” (close enough☺) obligation, and an Adviser with a professional “fiduciary” duty to you and to none other.

By doing this, I believe that you will learn something more valuable than the last one hundred telephone calls and meetings, with your current “advisor”. (Add this info to the crazy idea that perhaps there is a difference between the person using an “adviser” or an “advisor” title. In some jurisdictions it is THE trick.)

Secret tip #3. Hone your spider-senses to the absolute perfection, as well as the absolute bullshit, of the investment industry “bait and switch” marketing. This is the advertising, luring, baiting and promising of trusted financial professionals, whilst cleverly switching the “product” upon delivery to that of an extremely conflicted commission salesperson or broker. One with massive industry incentives and SEC loopholes to NOT have to place your interests first.

As a professional "Investment Bodyguard" I found this article well written and insightful. Readers looking for an alternative to what information is offered out there might benefit from one on one, sit down education and/or discussion sessions with a coach (or bodyguard:).

It is like having a very close friend, who is an expert in the field of interest, who will sit with you and talk endlessly in plain, clear language, while not having any hidden conflicts of interest. Costs about the same as hiring an engineer or psychologist by the hour. Could be worth half your future retirement…or more.

Imagine that sometimes the broker, otherwise know as the "advisor", might be the pickpocket in your financial relationship…..how do you know who to trust and how do you learn the ropes?

Investment Coaching: Catering to the DIY Investor

February 24, 2015 by makinthebacon Leave a Comment

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One of the great things about the investment course I’m currently taking is that from time to time, guest speakers are brought in to talk about various concepts of investing.

The most recent guest speaker was Aman Raina, an investment coach from Sage Investors. You can follow him on twitter @sageinvestors. He delivered an engaging presentation on capital and the balance sheet. We also went through a company’s balance sheet to determine if it was a good company to invest in.

I enjoyed the presentation so much and was very curious about investment coaching because it was the first time I had ever heard the term. This may also be the first time you’re hearing it too! So I reached out to Aman via email and asked him if he could do an interview for my blog about investment coaching and the services his company provides.

Here are his responses to my interview questions:

1. How would you describe investment coaching and how is it different from traditional investment advice?

The traditional financial advisor provides ideas, strategies and recommendations regarding security selection for an investor. This advice is often provided by an individual that can be directly or indirectly associated with a financial services organization and as a result, any advice offered can be potentially tailored to the purchase of financial products that may or may not be appropriate for an investor’s portfolio.

A financial advisor is compensated either by charging a flat fee for specific set of services (developing a financial plan, portfolio management etc) or by taking a percentage commission based on the total assets of the portfolio.

An investment coach focuses on elevating an individual’s financial literacy and decision-making capacity through a combination of education and one-on-one real-time mentoring. An investment coach is an independent third-party resource that is not associated with a financial institution nor do they sell or promote specific financial products. An investment coach can be compensated on a flat-fee basis or on an hourly basis.

2. What made you decide to become an investment coach?

In a previous life, I used to work as an independent investment analyst and specialized in providing customized investment analysis and research using the Economic Value Added portfolio to individual portfolio managers and institutional investors. Over time, I came to a realization that this segment, which has limitless access to investment data really didn’t need much help, let alone help from me. The nature of the investment industry is that the institutions will make their money no matter what.

What I noticed over the years is that these institutions were making their money at the expense of individual investors who were essentially talked down to and treated like 3rd class citizens. I was always getting questions by people who were exasperated and confused by the lack of performance in their portfolios and the lack of support their advisors were giving them. Some of the stories were heartbreaking and frankly made me angry and I always thought there has to be a way to help these people. They are working hard and trying to the right things but the system which in its current form should be helping them was not supporting them. After a series of stock market crashes in early 2000’s, investors just became fed up with what the traditional financial advisor model was offering them and were seeking to take control of their financial decision-making.

The emergence in the last 10 years of the Do-It-Yourself class of investor, who is trying to take control of their financial destiny didn’t just happen by accident. This evolution is commendable, however what I ‘ve seen is that this class of investor still needs an avenue and ideally an objective, independent party to bounce ideas and decisions they are facing rather than having someone sell a product to them. They are also seeking a confidante that will not tell them what to do, but can give them tools and emotional support and discipline that can help them make better decisions.

I looked around and realized while there are many people and companies who are defined as “Money Coaches”, it appears the level of coaching is focussed primarily on learning to save and pay debt . There really wasn’t anyone focussing on the investing side which is a huge component in the process of building wealth over a long period.

Personally, I have always found that the concept of investing in stocks to be intuitively and mechanically simple. Buy well-managed businesses that sell products and services people want, create tangible wealth and buy those companies when they are on sale and sell them when they have reached their intrinsic value or a return we are comfortable with. We know the process. The problem is we do a lousy job of executing it because we lack the education, but more importantly the emotional discipline.

I really believe anyone can learn and develop into a successful investor without getting a CFA or an MBA. I believe it can be done with a time commitment, education, and most importantly working with someone who can instill some structure, discipline, and more importantly working with someone who genuinely wants them to succeed. This is where I feel an investment coach can offer value.

coach talking to playersImage courtesy of pal2iyawit/FreeDigitalPhotos.net3. Could you briefly describe the services your company provides?

We offer 2 streams of investment coaching services. The first stream involves a combination of learning and coaching. We offer these in a monthly module format. For each month, we would undertake the following program.

1-2 hours per week of one-on-one tutorials on key investment topics and concepts that are customized to the protégé’s level of investment knowledge and experience. In a one month module, we’ll go over about 4 learning tutorials. Another 1 hour per week of follow-up coaching conversations where we will drill down into realtime investment decisions the protégé is facing. The goal is to leverage the learnings from the learning modules to enhance and improve the protégé’s decision making capability.For each monthly coaching module, we charge a flat fee. There is no fixed long-term commitment required. You can go month-to-month and come back later on. To gain maximum value out of these learning/coaching modules, a commitment to allocating the time is important. The second stream is involves just coaching conversations. We found that many people, especially the more experienced investors, just want to discuss their personal investing situation only. For this service we charge on an hourly basis.

4. How do you determine what kind of coaching a person needs?

One of things I like about coaching is that each person I work with doesn’t fall into a standard cookie cutter program path. Before engaging in a coaching/learning module or individual coaching conversation, I like to meet briefly either on the phone or in person with a potential protégé to understand their background, as well to gauge their comfort level with investing, their risk tolerance, and finally what financial goals they are seeking to achieve. I also ask every protégé how much time they are willing to commit to learning to invest as ultimately their level of commitment will drive the path in how I develop their education and coaching program.

I should note that I do not automatically take on protégés. In some very rare cases after an initial conversation, I have determined that a coaching program may in fact not be beneficial to them and will suggest other more channels that could provide greater benefit.

5. How much of a time commitment is needed to receive investment coaching and is there a lot of homework involved?

In a typical one-month learning/coaching module, a protégé is expected to commit to about 1-2 hours week of participating in a one-on-one learning session along with about an hour per week of coaching conversations. So in a typical month, a protégé will spend roughly 12 hours engaged in learning and coaching conversations. In terms of “homework”, there is some extra research work expected but I try not to make it a chore because if it becomes a chore than it can be procrastinated upon. A lot of it is just reading the newspaper, watching the news or searching online for various investment information, tasks you can do tapping away on your smart phone/tablet while sitting in the subway or lounging at home. These are typical activities you need to do when evaluating investment opportunities.

6. The concept of investment coaching is still relatively new to most people and to the finance industry. Do you see it becoming a growing trend in the near future?

Investment coaching is a very new type of relationship, so I realize that a lot of people have no idea it even exists. I do believe that as more people seek to take control of their finances, they will seek to learn more about investing. I know this is true because you can just go to the book store and find endless shelves of books on investing and also on the Internet where there are numerous blogs and web sites which provide great ideas, resources, and perspectives on investing. The desire to learn is there. The problem is the quantity of information can be overwhelming. Working with an investment coach who can help them learn about how to filter that mountain of information can be invaluable, so as more people become aware, I see investment coaching gaining traction.

7. What do you enjoy most about investment coaching?

At the end of the day, I want to help people be successful and helping them accomplish something that is important to them. Investment coaching has provided me with a great avenue into achieving this. I’ve had the opportunity to work with people who are so committed to learning about investing and improving their financial street smarts. I’ve gained great satisfaction to working with people who come in with little understanding about investing and seeing them develop to make better more successful investment decisions. The great part is they made it happen! They own it and it is likely to stay with them. They have worked hard to develop their financial competency. It’s great to see people become more confident in their capabilities. I also enjoy the fact that because I’m not tied to any other financial company or affiliate, I can express my ideas and thoughts good or bad without fear of being shackled down. So people working with me know I am telling it like it is.

8. What requirements does one need in order to become an investment coach?

There is no registered certification for being an investment coach, however I would say a good investment coach or any type of coach should possess core competencies such as being able to listen with empathy, an ability to synthesize large volumes of information and articulate them in a matter that a protégé can understand, along with being comfortable with working with people (when you sign up as an investment coach, you’re now in the people business!) as well as being flexible and adapting the coaching/learning program as the relationship with the protégé evolves.

In addition, the investment coach should carry themselves with a high level of professionalism and transparency. Finally, an investment coach should have the obvious proficiency in investing. In my case I’ve done a fair amount of formal school training (B.Commerce, MBA, Canadian Securities Course etc) to develop my investment skillset along with thousands of hours in analyzing and evaluating companies and their stocks. In a way I feel very much like an Outlier. Malcom Gladwell would be proud of me!

9. What advice would you give to someone who is considering becoming a DIY investor and/or considering investment coaching?

The first question I ask potential protégés is how much time they are willing to commit to learning about investing. If they really don’t have the time or couldn’t be bothered with understanding the nuances of how companies create wealth and how to evaluate stocks, but they still want to have exposure to the stock market, then I would create a program that give them the fundamentals of understanding passive investing and more importantly how to be more street smart when interacting with the financial community. If they are indeed willing to put in the time to learn and understand the technical and behavioural intricacies of investing then I would create a different kind of program. Neither path is a bad road to take. The reality is everyone is in a different space when it comes to investing. That would be the first thing someone considering becoming a DIY investor needs to have. They need to have clarity in themselves before moving forward either going it alone or with a counsel like an investment coach.

A coalition of fiduciary advocates has unveiled a set of best practices for advisors that they envision could eventually become an industry certification, providing consumers with an easily recognizable designation that a financial professional is bound to act in their best interest.

"In recent times the meaning of fiduciary has been transformed. Investors have been confused, skeptical or downright distrustful of many financial professionals," Rostad said in a news conference announcing the best practices.

The institute is asking industry members and other interested parties to submit comments on the draft principles. Once the comment period closes March 9, a council of experts that Rostad's group has convened will review the feedback and aims to issue a final version of the best practices in June or July.

AVOIDING CONFLICTS

Rostad and others involved with establishing formal best practices see them as a way of drawing a bright line between fiduciary advisors who are duty-bound to put their clients' interests before their own, and other professionals -- including unscrupulous wealth managers -- who might prioritize their own profits and offer deeply conflicted advice.

"Far too often, the interests of asset managers and registered investment advisors overwhelm the interests of investors," Vanguard founder Jack Bogle, who co-chairs a council of advisors on the institute’s best practices, says in a statement. "In short, salesmanship has trumped stewardship in our nation's financial system. The time has come for the field of investment advice to return to its traditional values of fiduciary duty and trust."

The new best practices focus on the ethical dimension of fiduciary advice, calling on advisors to affirm in their engagement agreements with clients that they are themselves fiduciaries as that term is defined in the 1940 federal Investment Advisers Act, and that that definition "governs the professional relationship at all times."

Next, the institute is calling on advisors to generate documentation outlining the "reasonable basis" for advice provided that’s in the best interest of each client, including a description of the investor's goals and circumstances, as well as a more detailed explanation of the specific investment strategies the advisor has developed.

The best practices touch on several of the overarching duties that backers of a strong fiduciary standard advocate, including a duty to act "prudently" and in "utmost good faith," to avoid conflicts whenever possible and to control investment expenses.

DISCLOSURE OF FEES AND EXPENSES

For instance, the best practices call for advisors to provide clients with clear and truthful communication, to make all disclosures in writing and to issue, on at least an annual basis, a full accounting of the fees and expenses the client has paid.

Similarly, the guidance urges advisors to avoid forms of compensation that could create a conflict and potentially skew their recommendations, such as major gifts, certain sales commissions and third-party payments.

Taken together, the best practices are a response to what the institute describes as pervasive investor confusion about the business models of advisors and broker-dealers, including how they're compensated and what services they offer, a picture that's further muddied by convoluted explanations of fees and expenses.

Once the best practices are finalized, the institute will begin work on a verification system where a third party would evaluate an advisor's practice and determine whether to confer the fiduciary designation.

"These best practices really seek to make it very clear as to which side of the aisle a financial advisor sits on," says Brian Hamburger, CEO of the RIA compliance firm MarketCounsel, who is serving as chief counsel to the group that drafted the new principles.

Rostad stresses that his team has not yet worked out how the verification process will work, or whether it might take the next step of developing a formal industry credential through that review.

"I think that we are steps away from that right now, but that is clearly one of the options," he says.

But he argues that investors need better tools to help them navigate an increasingly complex financial services sector, and warns of a "deeply troubling" trend in Washington where the policy debate seems to be shifting toward a watered-down version of fiduciary duty that would sanction conflicted sales practices.

NOT RELYING ON REGULATORS

At the SEC, regulators have been considering whether to adopt a uniform fiduciary standard that would apply in equal measure to advisors and broker-dealers.

Rostad says he is skeptical that the commission will actually enact such a rule, but in the event that it does, he expects that the final regulation would fall well short of the best practices his organization is urging advisors to embrace on their own.

"Even if the SEC does proceed," Rostad says, "if this industry we call advice truly wants to develop into a profession, it's going to be because the practitioners themselves make it happen, and not because of any government regulators."

Product Sellers or Advice Givers? Best Practices Put this Question First Vanguard Founder John C. (Jack) Bogle: “The time has come to return to traditionalvalues of fiduciary duty. The ‘Best Practices’ proposal ... is an important first step”

San Diego, January 29 -- The Institute for the Fiduciary Standard today proposed eleven Best Practices fiduciaries should meet to serve the best interest of their clients. The Best Practices are released today for public and industry comment due March 9 and are available at http://www.thefiduciaryinstitute.org.Knut A. Rostad, president of the Institute for the Fiduciary Standard, said in a statement, "Fiduciary duties have defined relationships of trust and confidence in investment advice for generations. Yet, in recent years the meaning of fiduciary has been transformed, so many investors today are confused or skeptical or downright distrustful of financial professionals – even fiduciaries. Investor misconceptions about who’s selling products and who’s offering advice, and what they pay, are pervasive.”

“This ‘Made in Washington’ confusion parallels a ‘new view’ of fiduciary, seen in statements of regulators, policymakers and brokerage lobbyists. This 'new view' suggests a true fiduciary standard is unnecessary or outright harmful and must be altered to better accommodate conflicted sales practices. This ‘new view’ is profoundly ‘anti fiduciary’ and deeply troubling."

“Best Practices are designed to help investors identify true fiduciaries committed to objectivity, transparency, and plain English communications. Crafted to be concrete, verifiable and understandable – Best Practices communicate to investors how true fiduciary advisers and brokers are a breed apart,” Rostad concluded.

Vanguard Founder Jack Bogle on the Best Practices

Vanguard founder John C. (Jack) Bogle, who co-chairs the Council of Advisors on the Best Practices initiative, notes: "America’ s bloated financial system has earned the distrust of our nation’ s investors. Far too often, the interests of asset managers and registered investment advisors overwhelm the interests of investors. As it is said in holy writ, “No man can serve two masters.” In short, salesmanship has trumped steward-ship in our nation’ s financial system. The time has come for the field of investment advice to return to its traditional values of fiduciary duty and trust. The “Best Practices” proposal of the Institute for the Fiduciary Standard is an important first step."￼1￼Tamar Frankel on Investor Mistrust , “Not since the 1930’s .....Boston University fiduciary law scholar, Tamar Frankel, who also co-chairs the Council of Advisors for the Best Practices initiative, underscored the relevance of investor distrust, "

Not since the 1930s have investors so mistrusted their advisers. Advisers must take this mistrust seriously

. The time has come for advisers to publicly explain how they are committed to fiduciary principles in the service of their clients."

NAPFA, Institute Best Practices PartnerThe National Association of Personal Financial Advisers (NAPFA) partners with the Instituteon the Best Practices Initiative. NAPFA CEO, Geoffrey Brown, states, “The development of advisor best practices supports NAPFA’s goals of advancing fiduciary principles to protect consumers and elevate the ethical and educational standards for financial planning professionals. We look forward to hearing the feedback garnered through the public comment period.”

Best Practices BoardThe Best Practices were drafted by the Best Practices Board over the past ten months. The Best Practices Board members are:Clark M. Blackman II, CFA, CPA/PFS, AIF, Alpha Wealth Strategies LLC Bryan D. Beatty, CFP ®, AIF ®, Egan, Berger & Weiner LLCChristopher W. Cannon, CFA, FirstrustWilliam C. Prewitt, M.S., CFP ® Charleston Financial Advisors, LLC Knut A. Rostad, MBA, AIF®, Institute for the Fiduciary StandardInstitute Developing Protocols and Procedures to Verify Compliance with PracticesThe Institute is working with outside experts to develop procedures to verify that an adviser or broker meets the Best Practices. Brian Hamburger, Chief Counsel to the Best Practices Board notes, "We can create the greatest set of standards for the industry, but this initiative seeks to go beyond that. If a firm's achievement against these practices is not measureable then they will have little value and no merit."

Public Comment

The Institute seeks public and industry comments on the Best Practices, and asks that these comments be emailed to the Institute by Monday March 9, 2015 at: info@thefiduciaryinstitite.org

￼2￼Sources for Comment on Best PracticesMichael E. KitcesPartner, Director of Research Pinnacle Advisory GroupColumbia, Maryland Michael@kitces.com; 703-375-9478Daniel B. MoisandPrincipal and Financial AdvisorMoisand Fitzgerald Tamayo Dan@moisandfitzgerald.com; 407-869-6228Ron A. Rhoades, JD, CFP®Asstistant Professor, Business Department Alfred State (SUNY) RhoadeRA@alfredstate.edu; 607-587-3469Council of AdvisorsThe Council of Advisors formed to advise the Best Practices Board in crafting best practices for fiduciary advisors.The Council of Advisors is co-chaired by John C. (Jack) Bogle. Founder, The Vanguard Group and Tamar Frankel, Michaels Faculty Research Scholar at Boston University School of Law. Council members include: Steven G. Blum, The Wharton School, Deborah S. Bosley, The Plain Language Group, Robert G. Kennedy, University of St. Thomas Opus College of Business, Woodrow W. Leake, retired university professor, and Edward J. Waitzer, Osgoode Hall Law School and Schulich School of Business, York UniversityContact:Knut A. Rostad, PresidentInstitute for the Fiduciary Standard Office: 703-821-6616 x 429 Mobile: 301-509-6468 kar@rpjadvisors.comhttp://www.thefiduciaryinstitute.org￼￼￼￼￼3￼BEST PRACTICES BOARDProposed Best PracticesJanuary 2015 Introduction

Today, a wide range of financial professionals serve investors in a dynamic and complex market place. ‘Best Practices’ are designed to assist investors in evaluating and selecting investment advisers and wealth managers from among these diverse professionals. Investors seek guidance which is objective, transparent, and understandable. Best Practices, crafted to be concrete, verifiable and understandable, exist to assist them in doing so.Fiduciary principles include two sets of competence criteria. “Technical” criteria such as education, expertise and experience, and “ethical” criteria such as character, honesty and transparency. Both are important, particularly so when both investor and regulatory shortcomings are ubiquitous. (See Institute white paper, http://www.thefiduciaryinstitute.org/wp ... s/2014/05/ BestPracticesPaperMay13.pdf. ) Yet, today, ethical criteria need greater strengthening and present significant risks to investors. They are the focus of Best Practices. (See Institute whitepaper, http://www.thefiduciaryinstitute.org/wp ... 102014.pdf

Investor misconceptions about what advisers or brokers do and how they are compensated, and how much investors themselves pay for these services are all well-documented. The Best Practices Board believes strengthening practices regarding conflicts of interest, opaque and unreasonable fees and expenses, and incomplete or incomprehensible communications can address these concerns.

Codes of ethics and practice standards are generally developed and administered in four phases: i.e.: discussion and analysis, recommended practices, required practices and verification or enforcement. Each phase serves a purpose. Yet, the central question is what practices are required and verified or enforced. Best Practices are written to be understood by Main Street investors and to be concrete and verifiable as opposed to aspirational. (This ‘Plain English and verifiable’ attribute is especially important today where, fairly or not, investor distrust of Wall Street and financial services has seeped into investors’ views of advisers and brokers and is pervasive.)

Best Practices follow on the Institute whitepaper, http://www.thefiduciaryinstitute.org/wp- content/uploads/2013/09/InstituteSixCoreFiduciaryDuties.pdf. They are also informed by the good work of others in the professional standards arena; i.e.: fi360, CFP Board, AICPA/ PFS, CFA Institute. Also, writings that include, The New Fiduciary Standard (Hatton), The Management of Investment Decisions (Trone, et al.) and The New Wealth Management (Evensky, at. al.) 1Best Practices strive to reflect the best legal scholarship and current practices; i. e.: as evident in how conscientious fiduciaries serve clients’ best interests today. This entails assessing risks and costs and the wide variety of strategies in differing facts and circumstances. This requires both prudence and flexibility to meet diverse client risk profiles and levels of client sophistication. This we have strived for. On this and the particulars of the eleven Best Practices we seek industry and public comment.￼￼￼￼￼4￼BEST PRACTICES BOARDFiduciary duty requires that advisers,and brokers giving advice,put their client's best interests first. Fiduciary practices spell out how advisers and brokers should serve their clients.General Practices1. Affirm that the fiduciary standard under the Advisers Act of 1940 governs the professional Relationship at all times.This language is placed in the engagement agreement.2. Provide a “reasonable basis” for advice in the best interest of the client.The “reasonable basis” documentation includes relevant facts, analysis and circumstances. The scope and nature of the client engagement and a client’s goals and overall circumstances are central to the breadth of analysis. The relevant facts should include key assumptions, the universe of data considered, and the analysis applied. 2Further, more prescriptive documentation regarding the selection of investment vehicles, may include a more detailed group of factors which include: “liquidity, marketability, minimum required investments ...” and risk. 3Duty: Act in Utmost Good Faith3. Communicate clearly and truthfully, both orally and in writing. Make all disclosures and agreements in writing.￼￼￼5￼BEST PRACTICES BOARD4. Provide, at least annually, a written statement of total fees and underlying expenses paid by the client. Include an accounting or good faith estimate of any payments to the advisor or the firm or related parties from any third party resulting from the advisor’ s recommendations.The purpose of this practice is to increase transparency and understanding of investment expenses. An increased understanding requires including the costs of the underlying investments investors pay with the advisory fee in calculating total fees and expenses. In the case of mutual funds, this typically includes the expense ratio and transaction costs. To be complete, the annual statement of fees and expenses must include these underlying investment expenses.While improvements have been made, the industry remains too opaque about underlying investments’ fees and expenses. Expense transparency may fall into four categories. Some expenses (mutual fund expense ratios) are readily available. Other expenses are not available but can be calculated. Still other expenses cannot be calculated but may be reliably estimated. Finally, there are some expenses that may not be either calculated or reliably estimated. Consequently, any client’s annual underlying expenses may include expenses that are simply reported, those which are easily calculated, those which must be estimated and those which cannot be reliably estimated.Thus, calculating or estimating underling expenses can be met in a variety of ways. Here are four. First, it may be met through an accounting of the actual expenses associated with the investments. Second it may be met through a good faith estimate of the underlying expenses. A brief overview explanation of the basis of this good faith estimate should be included. Third, it may be met through a combination of these two approaches. Forth, this practice may be met through an accounting and / or estimation of a typical firm portfolio with allocations that resemble, but most assuredly are not the same as, the client’s.Additional disclosure on a quarterly basis reminding clients of fees and expenses is beneficial. However, it should not substitute for an annual fees and expense report.￼￼￼6￼BEST PRACTICES BOARD.Duty: Loyalty - Avoid Conflicts of Interest; Disclose and Manage Unavoidable Conflicts5. Avoid all conflicts and potential conflicts. Disclose all unavoidable potential and actual conflicts. Manage or mitigate material conflicts. Acknowledge that conflicts of interest can corrode objective advice.A conflict of interest disclosure document is created as an addendum with the engagement agreement.Managing material conflicts involves several steps. First, there must be clear, complete and timely disclosure. Second, fiduciaries must have a reasonable basis for believing that clients fully understand the implications of the conflict to the advisor and client. Implications may include the relative merits and risks of options not chosen by the advisor, and the additional fees earned by the advisor (whether paid out of client funds or not) and any additional client paid expenses incurred. Third, the client must provide "informed, intelligent, and independent" consent before the transaction is completed. Finally, after receiving client consent, the advisor must also be able to demonstrate that the transaction remains reasonable and fair and consistent with the client's best interest.Additional care should be taken with the highest risk transactions that, for example, may carry material conflicts as well as high commissions. Two examples of such transactions, in certain situations, are indexed annuities and proprietary products. For these transactions, additional care should include:• Duplicative compensation is credited back to the client or, if this is not possible, at minimum, is not accepted by the firm or individual fiduciary and donated to a charity.• Further, prior to proceeding with the transaction, the client may review the terms of the proposed transaction in writing for seven days.Regarding indexed annuities, while the underlying concept may be attractive, the conflicts associated with the high commissions in the current distribution channels – such as a 6% upfront commission – are very difficult to overcome.6. Abstain from principal trading unless a client initiates an order to purchase the security on an unsolicited basis.Principal trading “Occurs when a brokerage buys securities in the secondary markets, holds these securities for a period of time and then sells them. The purpose behind principal trading is for firms to create profits for their own portfolios through price appreciations.” 4￼￼￼￼￼7￼BEST PRACTICES BOARDThis practice applies to the individual fiduciary, not to the firm. The adviser or broker may purchase the security on a ‘best execution’ basis. The fiduciary must disclose that the firm’s analysts have determined that the firm’s best interest is to sell this security from its inventory.7. Avoid significant gifts, third party payments, sales commissions, or compensation in association with client transactions that cannot be directly credited back to the client or managed as a fee offset.This includes payments directed to the adviser or broker and includes soft dollars, subsidies, shelf space payments, 12b-1 fees paid to the firm.This practice seeks to avoid compensation that is duplicative or can impair objectivity. Some commissions will not, per se, be covered by this practice. An example of a commission that is not covered by this requirement would be one consistent with the adviser’s other fee arrangements with existing advisory clients, such as C-class shares when handling small accounts, and is provided to the adviser when he or she is not otherwise compensated for the service.It is important to avoid compensation, gifts, or remuneration that are not inconsequential or whose value exceeds $100 and that may impair objective advice or may be reasonably perceived to do so.Duty: Act Prudently -- With the Care, Skill and Judgment of a Professional8. Ensure baseline knowledge, competence, experience and ongoing education appropriate for the engagement.Baseline knowledge and experience as demonstrated by holding industry accepted designations, which include: AICPA/PFS, CFA, CFP, ChFC, Masters in Financial Planning9. Institute an investment policy statement (IPS) or an investment policy process (IPP) that is appropriate to the engagement and describes the investment strategy. Consistently follow and document a prudent process of due diligence to research and analyze investment vehicles; on request, document the prudent process applicable to any recommendation.The IPS or IPP may be of varying lengths, but it should express, at minimum, assumptions regarding objectives, risk and expectations regarding performance.￼￼￼￼￼￼￼￼8￼BEST PRACTICES BOARD10. Have access to a broad universe of investment vehicles that provide ample options to meet the desired asset allocation and in consideration of widely accepted criteria.Duty: Control Investment Expenses11. Consider peer group rankings in ensuring compensation and expenses are reasonable.Controlling investment expense should not interfere with the fiduciary being able to recommend from a broad array of securities and other investment vehicles consistent with the client’s risk tolerance, time horizon and sophistication. Similarly, broad discretion does not free the fiduciary from the duty to avoid unnecessary expenses and the duty to justify investment costs, particularly if they exceed peer group averages or typical expenses for the risk assumed. Similar to the working definition of “best execution,” controlling investment expenses does not require the least expensive alternative; it does require a reasonable basis and full explanation for higher than “average” expenses.Data sources for peer group expenses may include Yahoo Finance, Bloomberg, fi360 and Morningstar.End Notes1. This reference to the good work of other fiduciary experts does not imply their endorsement of the Best Practices; the reference acknowledges their contributions to the field.2. Statement on Standards in Personal Financial Planning Services, AICPA, Personal Financial Planning Division.3. Prudent Practices for Investment Advisors, fi360, 2013. See Practice 3.3.4. Investopedia.BEST PRACTICES BOARDClark M. Blackman II, CFA, CPA/PFS, AIF ®, Alpha Wealth Strategies LLC Bryan D. Beatty, CFP ®, AIF ®, Egan, Berger & Weiner LLC Christopher W. Cannon, CFA, FirstrustWilliam C. Prewitt, M.S., CFP ®, Charleston Financial Advisors, LLC Knut A. Rostad, MBA, AIF ®, Institute for the Fiduciary Standard￼￼￼

Dealing with an #investment #advisor ? Here a #CFA list of things/protectinos you might be missing. #CFA Institute http://buff.ly/1vNKiZp

Here is the CFA web page where you will find this list of ten things to protect yourself: Seriously….these guys ROCK!!

(CFA principles and professionalism is like the scientists at NASA……..as compared to the average investment dealer salesperson/broker who "refers" to themselves as an "advisor" to hide the fact that they are fairly untrained at advice and 1000% trained to earn commission. Those folks (the non registered, non licensed "advisor" types) are the flea-market salesperson selling balsa-wood airplanes, when compared to the skill level of CFA's…….jus sayin.

STATEMENT OF INVESTOR RIGHTSThe “Statement of Investor Rights” was developed by CFA Institute to advise buyers of financial service products of the conduct they are entitled to expect from financial service providers. These rights reflect the fundamental ethical principles that are critical to achieving confidence and trust in any professional relationship. The list applies to financial products and services such as investment management, research and advice, personal banking, insurance and real estate. Whether you are establishing an investment plan, working with a broker, opening a bank account or buying a home, the Statement of Investor Rights is a tool to help you get the information you need and the service you expect and deserve.

Demanding that financial professionals abide by these rights helps you build trust in the person and/or firm you engage with, and thereby collectively restore trust, respect, and integrity in finance.

WHEN ENGAGING THE SERVICES OF FINANCIAL PROFESSIONALS AND ORGANIZATIONS, I HAVE THE RIGHT TO…

￼1. Honest, competent, and ethical conduct that complies with applicable law;2. Independent and objective advice and assistance based on informed analysis, prudent judgment, and diligent effort;3. My financial interests taking precedence over those of the professional andthe organization;4. Fair treatment with respect to other clients;5. Disclosure of any existing or potential conflicts of interest in providing products or services to me;6. Understanding of my circumstances, so that any advice provided is suitable and based on my financial objectives and constraints;7. Clear, accurate, complete and timely communications that use plain language and are presented in a format that conveys the information effectively;8. An explanation of all fees and costs charged to me, and information showing these expenses to be fair and reasonable;9. Confidentiality of my information;10. Appropriate and complete records to support the work done on my behalf.

How well do you know your current financial advisor or a prospective advisor?

This service identifies a major source of hidden financial risk - what you don't know about your financial advisor.

It only takes a minute to find out. Answer ten questions and click on Rate My Advisor. The results may shock you.

1. Does the advisor have one or more college degrees? (Check one) Yes (BA, BS)Yes (MBA, JD, MS)NoI don't know2. How many years of financial planning and investment experience does the advisor have? 3 years of less4 to 9 years10 to 15 years16 or more yearsI don't know3. Is the advisor a Registered Investment Advisor (RIA) or an Investment Advisor Representative (IAR)? YesNoI don't know4. How is the advisor compensated for his knowledge, advice, and services? Fee OnlyInvestment commission onlyInsurance commission onlyFee & commissionI don't know5. Is the advisor an acknowledged financial fiduciary? The acknowledgement must be documented in a service agreement. YesNoI don't know6. Does the advisor hold one or more of the following certifications: CFA®, CFP®, CIMA®, CPA®, PFS®, ChFC®? YesNoI don't know7. Does the advisor hold any other certifications or designations? YesNoI don't know8. Does the advisor have a clean compliance record at FINRA and/or the SEC? YesNoI don't know9. Did the advisor practice full disclosure and provide documentation for the information you need to make the right decisions when you select, monitor, and retain advisors? YesNoI don't know10. Does the advisor provide wealth management services or sell investment products? (Check one) Provides wealth management servicesSells investment productsSells insurance productsSells investment & insurance productsProvides wealth management services and sells investment or insurance productsI don't know

The best minds is "best investment practices" released a WHITE PAPER today, titled, "Key Principles for Fiduciary Best Practices".

It is a clear and simple, six page summary of the better thinking out there for investment customers, the investment profession, and is indicative of the type of investment relationship you wish for your family and your life savings. All else that poses as "investment advice" can run the risk of serious harm to you today. See Stan's GRAND DECEPTION topic in this same forum at viewtopic.php?f=1&t=193 for a look at how simple it is to cheat investors out of about half their life;s work in the name of investment "advice".

IntroductionKey Principles for Fiduciary Best Practices and an Emerging ProfessionKnut A. Rostad *

Fiduciary law is complex in its nuances and structures; fiduciary principles are not so complex. Instead they reflect the wisdom of Emerson, who noted, “Nothing is more simple than greatness; indeed, to be simple is to be great.” So it is with principles on which fiduciary best practices and an emerging advisory profession must rest. This paper notes the attributes of character, suggests relevant operating principles or premises for best practices based on these attributes, why these principles matter, and how they starkly differ from principles underlying common brokerage sales practices aggressively advocated by brokerage lobbyists. Throughout, the simplicity of these principles and their meaning to investors stand out.

Character is The Distinguishing Mark of a Profession

In a widely referenced article on professionalism, Richard B. Wagner in "To Think ... Like a CFP,” writes

"The classic professions are law, medicine, and theology. Additional ones might include journalism, teaching, nursing and architecture. All have the characteristics of working with ambiguity... a profession entails the conviction of divine influence, an altruistic motive, a strong ethical context, intense academic preparation, an esoteric common body of knowledge, and an educational curriculum." 1

Crafting and upholding standards, codes of conduct and best practices is inherently challenging. Dr. Robert Kennedy, Professor, Ethics and Business Law, at the University of St. Thomas, notes the

"distinguishing mark of a true professional is the ability to make sound judgments in conditions of uncertainty," and requires, not just knowledge and experience but also character and moral integrity. “A person of moral integrity needs also to develop two other character traits: courage and discipline."

2

* Knut A Rostad is president of the Institute for the Fiduciary Standard. The Institute is a non profit that exists to advance the fiduciary standard through research, education and advocacy. For more information see http://www.thefiduciaryinstitute.org.September 10, 2014￼

￼The fiduciary obligations of loyalty, due care and utmost good faith are well outlined through common law and regulatory rulemaking and guidance. Advice must solely advance a client's best interest -- as opposed to the interest of the advisor, his firm or a third party.

Essential criteria for a profession of fiduciary advice naturally fall into two broad categories. The “technical” criteria such as education, knowledge and experience, which are most evident in the duty of due care. “Ethical” criteria such as character, honesty and transparency and clear communications, are most evident in the duties of loyalty and utmost good faith. While both sets of criteria are essential, they are not evenly addressed today. Advisors and their membership organizations put far greater emphasis on “technical” criteria over “ethical” criteria. 3

“Ethical” criteria are revealed in how advisors view and address conflicts, the reasonableness and transparency of fees and expenses, and communications that are clear, complete, and truthful.

Caveat Emptor is the Distinguishing Mark of Brokerage Sales Practices

While character is the hallmark of a profession, caveat emptor, the Latin term for “Let the buyer beware,” is the hallmark of brokerage sales practices. Explicitly, all brokers say they do right by their customers – and many brokers do operate at or near the fiduciary standard investor expect. Implicitly, however, a very different picture emerges as industry lobbyists vigorously defend and protect conflicted advice, opaque fees and expenses, and misleading or incomplete communications.

In a July 14, 2011 letter to the Securities and Exchange Commission, the Securities Industry Financial Markets Association (SIFMA) sets out its views as to what it believes SIFMA’s brokerage standard should comprise (the SIFMA standard) when brokers are supposed to “put investors’ interests first.” 4 Here, SIFMA advocates for brokers continuing to “offer products and services that are available today” (essentially negating a “due care” duty), chides the SEC for prioritizing avoiding – as opposed to disclosing – conflicts of interest, sets out weak disclosure protocols (which are more efficient for the broker dealer but less effective for the investor), limits and confuses when the SIFMA standard applies such that during a single broker / customer discussion, a facts / circumstances exploration may be required to determine if the SIFMA standard applies at all, and, finally, permits the SIFMA standard to be restricted contractually. (There is no mention in the letter, however, of controlling investment expenses, prohibiting certain products or practices, strictly avoiding any conflicts, or requiring informed client written consent in any specific instance.) 5

These brokerage sales practices can be harmful to investors and the aggressive lobbying efforts to expand them underscore why the principles underlying fiduciary ‘Best Practices’ matter. Perhaps far more than is realized. Fiduciary principles appear “obvious,” “simple” and “uncontroversial.” And they are if you agree with them; they are not if you don’t. Brokerage lobbyists don’t; in fact they not only disagree, they dispute them at their core. They strenuously assert that fiduciary practices harm investors. This is why restating what these principles mean is important.2

￼Conflicts of Interest

Conflicts of interest have long been acknowledged as undermining independent and objective advice. As noted above,

the Advisers Act was literally conceived from the concerns of investors’ confusing advisors with product salesperson, or “so-called “tipster” organizations who disguised themselves as legitimate advisory organizations.”

6

Conflicts are deemed to be incentives, favors, benefits, or compensation which can reasonably be expected to impair objective advice. Compensation arrangements which directly alter payment levels to advisors or brokers depending on the investment strategy or product recommendations are well- known conflicts. Many conflicts are less obvious. At its heart, loyalty is being sensitive to, and competent at identifying and avoiding conflicts. With conflicts, a fiduciary advisor’s conduct and practices should reflect these principles and premises:

• Objectivity is essential. It is the essence of the meaning of advice.• Conflicts are bad; they can gut objectivity. In 2012, Carlo V. di Flora, then SEC Director, Office of Compliance and Inspections spoke on conflicts, “Conflicts of interest can be thought of as the viruses that threaten the organization’ s wellbeing...and if not eliminated or neutralized even the simplest virus is a mortal threat to the body...” 7• Neutralizing conflicts is needed. For unavoidable material conflicts, the harms from the conflict should be neutralized.• Disclosure’s impact is mixed – sometimes good, sometimes ineffective, sometimes harmful. While disclosure is at the heart of securities regulation, disclosure often does not work. Yale Management Professor Daylian Cain notes conflicts are corrosive and disclosure just can’t be trusted. "Investors usually do not sufficiently heed even the briefest, bluntest and clearest disclosure warnings of conflicts." 8• Disclosure must be in writing to be effective.• Disclosure along with instruction is better. Though simple disclosure is often ineffective, it can be improved with personalized counseling. The SEC notes, “No hard and fast rule can be set down as to an appropriate method for registrant to disclose... The method and extent of disclosure depends upon the particular client involved. The investor who is not familiar with the practices of the securities business requires more extensive explanation than the informed investor. The explanation must be such, however, that the particular client is clearly advised and understands before the completion of each transaction..” 9￼￼￼￼￼￼3￼• Disclosure with informed client consent is even better yet. The standard is “informed, intelligent, and independent” written consent.• Best’ always means ‘best’. Regardless of consent, the fiduciary advisor must show the transaction is fair and reasonable and consistent with the client’s best interest.• A voiding conflicts is best of all. Reasonableness and Transparencyof Fees and Expenses

Research suggests that

investors often understand little about advisers, brokers and their services and what they pay for investment services

. The 2008 Rand Report (Rand) reports "In fact, focus group participants acknowledged uncertainty about the fees they pay for their investments and survey participants also indicate confusion about fees." 25% of respondents who reported using an advisor or broker also reported they pay $0 for these services. 10 In a 2011 AARP study of 401 (k) plan partici- pants, as 71% of participants reported they did not pay any fees, while 23% said they do pay fees. 11

Jack Waymire, CEO of the Paladin Registry surveyed his members on the issue of transparency regarding, “credentials, ethics, compensation, investment expenses, and potential conflicts of interest.” Waymire states the survey shows

“advisors want to selectively disclose the information they provide to investors.” 86% said they did not practice voluntary transparency or documentation;” 14% voluntarily discuss their method of compensation when marketing their services

. 12A separate Paladin survey of 421 investors 11 found that 81% said they were “most concerned” about the various fees and commissions deducted from their accounts; 86% said they were “very confused” about the different expenses; only 19% said they were “comfortable” comparing fees and expenses of different advisors.

Bank of America Merrill Lynch wealth unit chief, John Thiel, according to an industry news report, recently spoke about the need to “create transparency around fees.” According to the report, Thiel said investors need three sets of information: an overall picture of what they pay in fees and commissions, specific information about what they are charged for transactions, and annual summaries. 14

With fees and expenses, a fiduciary advisor’s conduct and practices should reflect certain principles, which include the following:• Investor knowledge of fees and expenses is essential. Prospective clients should be fully apprised of the total estimated fees and expenses. Client’s should be fully apprised of the total actual fees and expenses and fees paid by any third party to the advisor.•

Investor misconceptions about fees / expenses are harmful; when intentionally perpetrated by misleading or false communications, these communications constitute fraud.

￼￼￼￼￼￼4￼Communicate Clearly, Completely and TruthfullyWarren Buffett is acclaimed world wide for his investment prowess; he is almost as well known as a champion of clear and candid communications to shareholders. Buffett associates successful investing with clear communications, "If you can't write something clearly it’s because you haven't thought it through clearly enough." In Berkshire Hathaway's "Owners Manual," one of eleven principles reads,

"We will be candid in our reporting to you, emphasizing the pluses and minuses important in appraising business value (as) ... the CEO who misleads others in public may eventually mislead himself in private."

15

Buffett's shareholder letters testify to his commitment to writing clearly and candidly. He personally writes several drafts of the letter over several months. Averaging about 12,000 words it is 'the longest shareholder letter in corporate America. Buffett explains he writes to be interesting and understood by his sisters, who are not experts in finance or business. They expect 'honest and accurate information' and 'straight answers to predictable questions.'

Buffett has criticized public company documents, "Too often I have been unable to decipher just what is being said or, worse yet, had to conclude that nothing is being said." Buffett continues, ... "In some cases, moreover, I suspect, that a less than scrupulous issuer doesn't want us to understand a subject it feels legally obliged to touch upon."

Unfortunately, many investment communications fall far short of the “Buffett Rule.” The worst shortfalls range from examples of communications that seem to clearly mislead investors to instances where certain facts are omitted and an incomplete or inaccurate conclusion may be easily drawn. For example: a Government Accountability Office research report found numerous brokerage firms falsely advertising "free" IRAs 16; a North American Securities Administrators’ Association report found widely varying and inconsistent disclosures of brokers' fees and expenses 17; and

a New York district judge scolded Goldman Sachs for arguing in a legal pleading that its statement to put investors interests first, one of its business principles, was mere "puffery"

. 18

The judicial scolding of Goldman Sachs regarding “puffery” raises an issue with brokers and fiduciary advice: how do brokers communicate their services to investors. Rutgers professor Arthur Laby argues that the strongest rationale for holding brokers to the fiduciary standard is that

brokerages have advertised “trusted advice” services in explicit language and titles for decades, and have created “reasonable expectations” that brokers are fiduciaries.

19

Georgetown professors Angel and McCabe extend this argument noting that

brokers should offer advice in the best interest of the client, because “To do otherwise is fraud because then the service delivered would not be what the customer thinks she or he is buying.”

205￼In many instances, however, investment professionals fall short by simply failing to translate industry jargon into plain language. Writing expert, Dr. Deborah S. Bosley, reports how a study by her firm, The Plain Language Group, of the design of key documents that TIAA CREF sent to retirement plan beneficiaries was associated with a myriad of language problems. The study concluded that the lack of “plain language” left people confused, undermined their trust in the organization and their confidence in pursuing financial goals. 21 TIAA-CREF and The Plain Language Group designed an easy to understand document that achieved the goal of communicating clearly with complete transparency.

When communicating, orally or in writing, a fiduciary advisor’s conduct and practices should reflect certain principles, including the following:• Plain language and investor understanding is essential. Plain language builds trust and confidence in the advisor and reinforces the importance of investing. The SEC’s revised ADV Part II reflects this understanding.• Unclear language is a serious problem. Language that is incomplete or unclear is harmful. Language that is designed to fulfill legal obligations, and be only understood by attorneys but incomprehensible to investors, is worse yet.• False statements disguised as “puffery” is very bad, considered fraud by some experts.￼￼￼6￼Summary and Conclusion

The "ethical" criteria of fiduciary duties are the core elements of what we think of as character. They provide the foundation for best practices regarding conflicts, fee/expense transparency and commu- nications. These principles represent established doctrine, embedded in centuries of law. They are noteworthy for their simplicity. For their elementary truths.

At their core, these principles reflect how we think about and seek to render objective advice; how we view our professional duty and serve our clients' best interests. Next to avoiding conflicts, applying the ‘Buffet Rule’ may best distinguish fiduciaries. We strive to make sure clients know the risks they take, the services we deliver and the fees they pay. It is what fiduciary advisors do and what so emphatically distinguishes advice from sales.

These principles contrast starkly with many underlying principles upholding brokerage sales practices - - practices which are either legally permissible or, have become de facto, permissible. How stark? Explicitly, all brokers say they do right by their customers – and many brokers do so and operate at or near the fiduciary standard investor expect. Implicitly, however, a very different picture emerges as

industry lobbyists vigorously defend and protect conflicted advice, opaque fees and expenses, and misleading or incomplete or incomprehensible communications. This is “the tone from the top” which is clear and unequivocal.

Examples are ubiquitous, so much so often they go unnoted. To mention a few: Rarely, if ever, do brokerage lobbyists criticize or discourage conflicted advice, (one lobbyist has actually suggested conflicted advice is good for investors. 22); urge short and simple written agreements or informed client consent agreements; or urge fee and expense disclosure (John Thiel’s remarks a noteworthy exception), or truthfully say what “suitability” truly means, in law; i.e.: “Investors, watch out.”

These examples suggest a theme: Brokerage sales is notoriously conflict-filled and conducted in an opacity that helps perpetuate many investors’ well documented and harmful misconceptions about brokerage services and fees.

This theme appears to parallel what investors believe, fairly or not, about big financial institutions. So it is not surprising that pundits, observers and investors from across the political spectrum view Wall Street bad behavior and public distrust of the capital markets and financial institutions with dismay, if not disgust. 23 What to do? Robert Fronk, of the Harris Reputation Quotient Survey may have it right, "One thing the public is screaming loud and clear about financial services is: be more sincere, be more honest, be more transparent." 24

Fiduciary advisers need to recognize they alone, among all industry participants, can reclaim their proud heritage, unabashedly embrace the ethical principles of fiduciary duties and restate in the public square in the clearest terms possible what it means to be a fiduciary adviser. They alone can rededicate themselves to this mission, because they understand their true value to investors. They must lead a campaign to defend and protect this heritage – for today and to pass on to the next generation.7

‘Best Practices’ Move Forward WithCouncil of Advisors, NAPFA Strategic Alliance,Brian Hamburger as General Counsel to the Best Practices Board

New Whitepaper Offers Key Principles for Best Practices

Washington DC -- The Institute for the Fiduciary Standard today announced the release of a whitepaper on ‘Best Practice’ Principles, appointment of the Council of Advisors and General Council to assist the Best Practices Board, and a new alliance with the National Association of Personal Financial Advisors (NAPFA) to help advance best practices

Institute president, Knut A. Rostad, stated "The ‘Best Practices’ initiative has struck a cord among many leaders in the industry. The time is right for fiduciary advisers to restate in the clearest possible terms in the public square what ‘Best Practices’ mean and why they matter to investors.”

New Whitepaper Highlights Key Principles, Best Practices to Follow

The Institute released a whitepaper, “Key Principles for Fiduciary Best Practices and An Emerging Profession.”

Rostad stated, “The paper sets out the principles on which ‘Best Practices’ should be based and how they sharply differ from the principles on which brokerage sales practices are based. These are not “differences” of nuance or differences of degree. They are fundamentally opposing views on the very foundation of the Advisers Act of 1940, and views on fiduciary principles expressed by the most respected economic thinkers and jurists of our time, from Adam Smith to Justice Harland Fiske Stone.”

Council of Advisors, Headed by Bogle, Frankel to Advise Best Practices Board

Vanguard Founder John C. (Jack) Bogle and Boston University School of Law professor Tamar Frankel will also advise the Best Practices Board and lead a Council of Advisors. Council members will offer insights on best practices and professionalism.

The Council of Advisors is comprised of professional recognized in their fields and includes: Steven G. Blum, Deborah S. Bosley, Robert G. Kennedy, Woodrow W. Leake, and Edward J. Waitzer. (See roster, below.)

NAPFA joins Institute for the Fiduciary Standard to AdvanceFiduciary Advisers Best Practices

The Institute for the Fiduciary Standard also announced a new relationship with the National Association of Personal Financial Advisors (NAPFA) to advance ‘Best Practices’

Rostad noted, “NAPFA is the industry’s most prominent membership organization singularly focused on fee-only fiduciary advice. NAPFA’s active participation, along with the participation of other groups, is welcome and is important.”

As Geoffrey Brown, NAPFA CEO, stated “Our strategic partnership with the Institute of the Fiduciary Standard is consistent with NAPFA’s goal of advancing fiduciary principles. We are pleased to combine our outreach efforts and thought leadership, to advance our shared aim of establishing fiduciary best practices. Our partnership represents one of the necessary step towards closing current gaps in consumer protection and education. “

Brian Hamburger, CEO of Market Counsel, to Serve as General Counsel to Best Practices Board

“The Institute welcomes Brian Hamburger, CEO of Market Counsel, to serve the Best Practices Board as General Counsel. Hamburger is widely respected as a SEC compliance expert and relentless champion of independent fiduciary advisers,” Rostad said.

Hamburger said, “It is an honor to be asked to serve as General Counsel to this esteemed board. The Best Practices Board has an ambitious goal in advancing the profession of investment advice. While so many firms focus on regulatory compliance as a minimum threshold, I know that best firms want standards to aspire to."

Best Practices Board to Meet In Washington, Brief Reporters September 15

The Best Practices Board members will meet in Washington September 15 and brief reporters on their work. (See thefiduciaryinstitute.org/…) Best Practices Board members are recognized and respected industry practitioners:

The fiduciary standard has been called “the highest standard under the law.” The best practices will incorporate broad fiduciary duties in accordance with common law, statute, regulatory opinions, and the Advisers Act of 1940. The best practices will also reflect the high aspirations for the fiduciary standard expressed in the landmark Supreme Court decision, SEC vs Capital Gains Research.The starting point for the Best Practices Board deliberations is the Institute’s paper, Six Core Fiduciary Duties for Financial Advisors.

The Best Practices Board seeks to complete its work by year’s end, and will put the best practices out for public comment. The best practices will be followed by plans to accredit and validate practitioners who meet them.

Institute for the Fiduciary Standard

The Institute for the Fiduciary Standard is a non-profit organization formed in Virginia to benefit investors and society by advancing fiduciary principles through research, education and advocacy. For more information: http://www.thefiduciaryinstitute.org.

Regulators continue to focus on the suitability of compensation and fee structures applicable to mutual funds and other investment funds. Their primary concern is that the fee structure chosen for the client must be clearly suitable given the personal circumstances of the client and the various fee structures available to the client.

The Investment Advisor (“IA”) must always be able to demonstrate that the fee structure is suitable for the client. Where a deferred sales charge (DSC) option is to be used and several load options are available for the particular fund, the client must be placed into the load option that provides the greatest economic benefit to the client, regardless of the level of compensation or commissions to the IA. For example, if a fund offers a low load option and a back end load option, and no other differences exist between the two options (for example, different management fees charged to fund) the low load option must always be selected for the client.

The CIBC Wood Gundy Advising and Trading Policy Section 3.7.2 Mutual Funds and Investment Funds Suitability of Fee Structures explains the firm’s policy in detail. In keeping with the firm’s policy, effective January 15, 2014, CIBC Wood Gundy will only allow DSC funds to be purchased on a back end load option on an exception basis. In order to seek an exception, the IA must:

1) Prepare a valid business case as to why the purchase of the back end load option is appropriate, including a detailed description of the benefit(s) to the client and confirmation that the merits/costs associated with the different load options have been explained to the client and the client agrees with purchasing on the back end load basis. The IA should keep a note of this information in v8 or in the client file. A copy of an e-mail requesting the exception is sufficient.

2) The Branch Manager or Assistant Branch Manager must review the exception request, and if approved, maintain a record of the approval.

There will be no impact to existing back end load positions. IAs are reminded that switching from DSC to the corresponding front-end load version of the same fund is not permitted unless such switch provides an actual benefit to the client, e.g., lower management fee charged to the fund. This type of activity is only acceptable if the IA maintains a reasonable basis for the recommendation and there is a clear and measurable benefit to the client.

Should you have any questions, please contact Business Risk Advisory & Effectiveness.

Investment returns are like Oxygen to the lifeblood of your financial future.

Investment dealers and advisors are in competition with you, for this Oxygen. However the supply (of returns) is limited, so that every breath (percent) you get is a breath they do not get, and vice versa.

It is a relationship where the more you gain, the less they have, and the more they gain, the less you have. This is NOT the right way to operate a healthy financial relationship.

Combine this with removal of fiduciary standards, "best interest" standards and the like, and you will find up to 90% of firms (in Canada) often use the LEAST suitable investment products (or commission paths), to gain the MOST of your investment returns for themselves.

They were called the best "relationship managers" in the business, and this simply meant they could svengali their way with more of their clients money. Imagine the traits of the best cons and liars in the world: “an aura of confidence, combined with an image of respectability”. See how "suitability rule" can be used as a ruse to cheat you: http://youtu.be/aWulI3Kwi_A?list=UUy8dpTRZHEz-0JBa_l0w7AQ

Now imagine how well they can succeed in the investment business, managing "you", and your trust in them. Not managing your money, but managing YOU.

Investing in this manner (like most "advisor" relationships) is like trying to swim with 70 lbs of weight around your neck……

Now imagine that amount of performance drag on your investment efforts.

The non-fiduciary "advisor" of today is a commission salesperson who, if they wish to become a vice president, they may act like a 20 lb drag weight to your reinvestment returns………….the investment "dealer" is a corporation with less "humane" instincts than even the worst advisor, a tolerance to harm others without anxiety, and an absolute immunity from the effects of lying…….they are a 50 lb weight around your neck.

(Don't even ask about the "safety" of the regulatory system overseeing this industry. Just know this: 100% (each and every one) of Canadian regulators are paid by the investment industry, and those at the top are paid over $700,000)(another 10 pounds of weight to add to your swimming efforts:)

This short rant was inspired by reading a blog post by Steadyhand, a marketer of investment funds, who in my opinion, does an honest job, and follows some of the better professional practices I have seen. Their blog article was prompted by an article in the Globe and Mail business section, which (business media) is another 20 pound weight……100lbs and counting….

SIMPLE SOLUTION #2 (find an honest, low cost provider of investment services who does not mind sharing their best practices publicly: Steadyhand blog article worth reading here: [url] http://www.steadyhand.com/inside_steadyhand/2014/07/14/asking_about_fees/[/url]Also posted as next flogg posting in this forum topic…..scroll down to view.

This article shared at http://www.investoradvocates.ca , 44 topics focused on the systemic tricks of the investment trade.

the "Click here to view forums" is how to see the "home page" of all topics

8 questions about your investments, and one firm that handles them all up front. This is how investment pro's act. http://buff.ly/1nsEVWW

Asking About FeesPrintPosted on July 14, 2014By Tom BradleyIn his column in the Report on Business the other week (How to Discuss Fees With Your Investment Adviser), Rob Carrick provided investors with a list of questions to ask their adviser about fees. In case any Steadyhand clients are interested in asking the questions, here are the answers.

1. Please explain how I’m paying you, and how much, both in percentage and dollar-value terms.The total amount of fees paid to Steadyhand is shown on page 2 of your quarterly statement. It’s presented in both percentage terms and dollar and cents.

2. Please list what services you provide clients like me in exchange for fees charged.Professional management of your portfolio. Assistance filling in application and transfer forms. Oversight and scrutiny of the transfers from another institution to Steadyhand. Investment advice, specifically as it relates to portfolio construction and asset mix. Education materials. A steady hand.

3. Do I own any funds that carry ‘deferred sales charges’?No.

4. Are there other fees I’m paying beyond your MERs (management expense ratios)? Am I paying the fund manager separately?No and no. Out of the MER we pay staff, fund managers, regulators and a whole host of service providers - lawyers, auditors, custodian, record-keeper, website host, landlord, etc.The only costs that are not included in the MER are those related to buying and selling securities in the funds (i.e. trading commissions). These costs are calculated and published semi-annually in the Management Report of Fund Performance (MRFP). The trading expense ratios (or TERs) in 2013 for the Equity, Global Equity and Small-Cap Equity Funds were 0.04%, 0.18% and 0.23% respectively.

5. What annual administration fees am I paying? Am I paying an annual administration charge on my RRSPs and TFSAs?None.

6. What am I paying to buy or sell the funds?Nothing - there are no commissions charged for transactions.

7. Please list the fees that apply if I withdraw money from a registered account of any type?None.

8. How much would your firm charge me to move my account to a different adviser?Nothing.

(I feel that Canadians would be well served by firms who act like this. Eliminate the commission-driven middleman and then eliminate the revenue-hungry investment dealer and you will invest like a man swimming freely verses one with two 20 pound weights around his neck:)

Seniors seeking financial advice, guidance and services for their retirement years represent a significantly increasing proportion of clients as a result of changing demographics,and this trend will continue for the foreseeable future.

Dealing with retail clients who are seniors gives rise to issues and considerations of which regulators ( and investment industry participants ) providing retail advisory and managed account services should be cognizant. This requires a near zero tolerance of rule breaches and deeper interpretations of rules as they apply to vulnerable seniors. ' We've always done it that way ” isn't going to cut it. Seniors just don't have the time to recover from large losses.

Based on our analysis of feedback received from Fund OBSERVER readers , looking at numerous client complaints as well as the apparent obliviousness of regulator complaint investigators to seniors issues ( high tolerance for what we believe are abusive behaviours) , we decided this OPEN LETTER was timely. We have the following suggestions for regulators sincere about protecting seniors. Some may already be covered by rules but are evidently not being adequately enforced. Implementation may include some combination of rule changes,, Bulletins, enhanced compliance reviews, changes in complaint investigation criteria , enhanced Rep training, INVESTOR ALERTS, tougher fines for elder abuse, more Streetproofing materials/brochures etc. :

Rather than just providing guidance each time a sweep identifies misleading marketing materials, fine and sanction dealers who deceive elderly clients by using such materials.

Require dealers to ensure that Reps working with seniors have the necessary qualifications , experience ,temperament and senior- specific training. Never permit any Rep that is under supervision to be assigned to a senior/retiree Account.

Require dealers/Reps handling the accounts of seniors to be trained in the recognition of cognitive issues affecting elderly clients.

Enforce requirement for dealers to approve any use of a title or designation used by Reps. that suggests some special skill for dealing with seniors.

Require dealers to disclose "clearly" whether providing the client with a fiduciary duty or a suitability duty.

Depending on account size, promote the preparation of Investment Policy Statements.￼￼￼Require Reps to clarify in writing whether or not a discretionary accounts carries with it a fiduciary duty as part of their client relationship disclosure statement.

Encourage and support enhanced NAAF (New Account Application) forms and risk tolerance and capacity assessment methodologies to reflect the unique needs of the elderly.

Require dealers to have a policy on "Free lunch" seminars that would include clear written disclosure on the invitation to clients if the seminar is supported or funded by a third party and enforce it.

Require close supervision of Reps that are dual registered to ensure the regulatory arbitrage game is not being played.

Ensure dealer processes keep the NAAF - KYC (Know Your Client) information up to date ( specifically life event changes) Require a copy of the signed and dated document to be provided to the client.

Require dealer Reps to justify to their clients the choice of a fee-based account. The justification should be in writing. Prepare a CSA (Canadian Securities Administrators) brochure listing the pros and cons.

Require dealer Reps to justify to clients any proprietary products or services recommended and to forthrightly proclaim in writing a conflict- of- interest.

In a Guidance Note , recommend that for every complex product or packaged solution such as pools and baskets, Reps give the client at least three days to review the materials in advance of any meeting to discuss and sign the documents. Encourage the client to bring a trusted friend or family member to the meeting. Ditto for an annuity recommendation.

Require dealer Reps to disclose the downsides of a proprietary product including the lack of transferability and typically higher fees. Prepare a plain language brochure on this topic. Ensure complaint investigators make this an important consideration in their analyses.

If a dealer Rep is recommending the redemption of any product with an early redemption penalty fee, require that the Rep fully justify the action especially since such redemptions also may cause the elderly person to incur unnecessary capital gains tax and in some cases eliminate their eligibility to obtain OAS or GIS.(Both subject to income tests ) .This could be via a Bulletin.

￼￼￼￼￼Ensure the amount of fees is disclosed in bold writing and initialed by the client that they fully￼understand the amount of the fees that they will be paying ( dollars and cents and percent).

In a ￼departure from embedded industry practice, make fees an element of suitability determination.

￼Consider the use of trailer paying securities ( or any other form of commissions) in fee-based￼accounts as a form of theft as part of a complaint or compliance investigation i.e. Treat it￼seriously.

￼Ensure the risk level on the NAAF-KYC is bolded and specifically initialed by the client that they￼understand the risk level documented on this form and how it was arrived at.

Resist industry initiatives to permit dealer Reps to act as executors or to be the sole Signatory to a Power of attorney for clients.

Require dealer Reps to provide a copy of all documents signed to clients when signed .( Consider use of any pre-signed blank forms a form of forgery)

Treat any post-signing adulteration of client documents as fraud.

When Reps recommend leveraging to borrow against their homes to invest, require robust safeguards to be put in place ( eg mandatory supervisor approval).

Encourage dealer Reps to avoid products with long hold periods,illiquidity or high early redemption fees and to document justification if they do recommend such products.

Prohibit dealer Reps assigned to seniors from any off- Book or personal financial dealings. Any referral arrangements should be disclosed to the client in writing. Hard wire this in the Client Relationship disclosure . Treat breaches with maximum penalties.

Investigate every complaint received from a senior or retiree . Responses should be written in such a way so as not to prejudice any third party litigation or OBSI file.

Enforce requirement to have dealers address client complaints honestly , fairly and expeditiously . They should provide a detailed explanation to support any decision. Ensure dealers explain options if client unhappy with result.( currently required but not always done)

The applicable regulator should promptly investigate every case where a dealer has rejected an OBSI recommendation for compensation and publicly disclose results.

Consider imposing a E&O Insurance requirement on any Rep dealing with seniors/retirees.

Change rules that would make dealers accountable for payment of fines if Rep does not pay.

It's long been known that seniors are especially vulnerable to the financially devastating impact of conflicted advice due to declining faculties.

Seniors are also more vulnerable because trust in dealer representatives (with inflated titles) is unduly high, increasing their susceptibility to defective advice.

Widowers or seniors distant from their families have less opportunity for “second opinions”. Three trends - a huge number of people suddenly turning older, the prospects of longer lives but fewer guarantees of financial security, and at the same time a substantial percentage of our national wealth in the hands of seniors - have the makings of a perfect storm, a demographic tsunami.

Financial abuse of seniors is a rapidly growing problem, often being called the “Crime of the 21st Century.”. Regulators have a wonderful opportunity to prevent a socio- economic fiasco.

Found another low cost, high transparency investment solution that I can say meets my approval:

Many times, investors ask me the same questions, namely. "how do I find someone I can trust to help me with my investments?", or "how do I even begin taking control over my own investments?"

It seems like an overwhelming task to gain control of doing your own investing, and it is what keeps many, many people trapped into the victimization of professional investment dealers and their commission salespersons. (aka "advisors")

So, always on the lookout for sound, ethical, professional solutions, I submit the following for your own research:

Professional.Disciplined approach.Do-it-yourself with clear step by step instructions on how to.A cost approach which alone could double one's retirement, just from saving the investment industry's takeaway of your returns.Empowerment, and control remains in the hands of the investor, with enough guidance to get you started.Custodian (who holds your money/investments) remains in the control of the investor.A youthful, yet experienced man with some values and ideas which he wishes to use to benefit fairness, honesty and good faith dealing for investors.

This is based on my own look into the process used, and I suggest you do the same for yourself, do not take my word for it. I have been wrong before, but my specialty is in spotting the sales scam, or the greed that gets easily hidden inside most investment situations, and I am personally satisfied in this case.

My opinions are my own, and not based upon any commercial, financial or other relationship that gives rise to a conflict of interest. I hope they help others who need a little help understanding the complex world of investing.

I think this should be added to the list of "solutions, best practices and self defence" and have put it here for your own study and consideration. Remember that simply cutting your investment fees and expenses by 2% per year will double your future capital when compounded over 35 years time.

Cutting out the commission middleman from your money could double your retirement without taking a single risk, or cost.......

Statement of Investor RightsTen rights that any investor should expect from financial service providers

The Statement of Investor Rights was developed by CFA Institute to advise buyers of financial service products of the conduct they are entitled to expect from financial service providers.

Investors: Present the Statement to your financial professionals, whether you are establishing an investment plan, working with a broker, opening a bank account, or buying a home.

Financial Professionals: Support the Statement and provide it to your clients to show that you are committed to fundamental ethical principles. Let your clients know that they can trust you to provide the service they expect and deserve.

The Statement of Investor RightsWhen engaging the services of financial professionals and organizations, I have the right to… 1. Honest, competent, and ethical conduct that complies with applicable law; 2. Independent and objective advice and assistance based on informed analysis, prudent judgment, and diligent effort; 3. My financial interests taking precedence over those of the professional and the organization; 4. Fair treatment with respect to other clients; 5. Disclosure of any existing or potential conflicts of interest in providing products or services to me; 6. An understanding of my circumstances, so that any advice provided is suitable and based on my financial objectives and constraints; 7. Clear, accurate, complete, and timely communications that use plain language and are presented in a format that conveys the information effectively; 8. An explanation of all fees and costs charged to me, and information showing these expenses to be fair and reasonable; 9. Confidentiality of my information; 10. Appropriate and complete records to support the work done on my behalf.

"I am not really an advisor in the same sense as other professions like law or accounting. I am really a salesperson, and my responsibility is to put my best interests and the interests of my employer and the industry before yours".Now that we've got that minor issue out of the way, let's get down to business! Time is money ...... and I've got quotas to meet and a contest to win!